Dealing with Project Underperformance - What Project Owners & Investors Need to Know

Part 2 – Distress Challenges – Diagnostics and Root Causes

In this week's edition of Dealing with Project Underperformance – What Project Owners Need to Know, we look at how to diagnose and evidence specific project underperformance and distress related issues. In particular, what tools and approaches can be deployed by project owners to begin the process of regaining control of their projects?

Distress factors as set out in last week’s Part 1, can occur at every stage of the project lifecycle. Therefore, to be able to effectively tackle underperformance or distress that is suspected, real or anticipated, it is important to firstly identify the key ‘red flags’ or symptoms. Understanding these and their potential severity, allows the development of the right review focus to effectively diagnose ‘root causes.’

All too often, project owners and delivery teams focus too much time addressing or treating the evident, symptoms-only, rather than focusing on diagnosing, reviewing and addressing ?the root issues - causing or inflaming the symptoms. Only by getting to the root causes can clients’ take the first vital step of regaining control of their projects and thereby reducing their concerns and fears of being helpless. This will also help ease the feelings of being ‘in the dark’ or lacking recent and reliable project data needed to make informed intervention and recovery decisions.

Leveraging Project Diagnostics

To effectively diagnose what’s really going on, on an underperforming or distressed project, it’s important to use a combination of methodologies that use both quantitative (data) and qualitative (insight/experience) review techniques such as data mining, root cause analysis, stakeholder interviewing, sampling and data vouching in order to build a wide picture of the underlying causes of underperformance and distress driving symptoms and their materiality.

3-Stage Review Approach? ???????

1.?Governance, Reporting & Controls - The level and quality of project reporting is a good indicator of project health. Erratic reporting, incl. big swings in cost/time incurred and to-go forecasting, are reliable indicators of underlying performance issues. Similarly, evidence of poor practices incl. late reporting, data inaccuracy, multiple updates within short time frames, omissions or late additions, all indicate potential performance issues. Next, it is important to review information flows and decision-making protocols to understand whether the defined and agreed? governance, delegated decision making and effective controls are in place to support informed and timely decision making. A key aspect of this is to understand where obligations and authority lie. As the diagnosis review broadens and deepens it should address how information management systems share data across the project stakeholder group, support good information handling, ensure data accessibility and integrity. What is the operating model and organisational design of the project? Is it delivering the outcomes needed? Are they fit for purpose or do they need improvement or reset? Added together, these reviews gather more and more information building the ‘as-is’ picture of the project. This picture can then be compared with the desired and intended outputs, highlighting differences that can then be analysed in greater detail depending on materiality.

2.?Performance & Behaviours – The next area of analysis looks into the actions and traits of individuals and how they may have changed over time, during the project. These can indicate deeper levels of underperformance and/or distress. It is important to firstly start by analysing and understanding the ‘envisaged’ roles and responsibilities as defined under the contract, be it for construction, supply of goods or professional services. Having understood and mapped these, use target samples (using Pareto’s 80/20 principle) to key project documentation, data, correspondence and notices to evidence actual actions vs obligations. In parallel, interview senior project stakeholders to test their understanding, positions, opinions and actions to provide vital additional qualitative insights into potential disconnects, blind spots and/or misunderstandings. This ‘holding up a mirror’ technique with appropriate probing by an expert reviewer, exposes differences, sensitivities or misunderstandings invariably linked to the growing levels of project distrust and tension. This information provides great insight into what’s going on below the surface of the project. Typically, these interviews uncover increasingly disconnected, even adversarial positions and accusations, as lines are drawn and defended – all adding further drag to a project already in distress. Having completed the above it is now vital to reconcile these positions against the contract and key relevant project data, in order to separate out opinion and hearsay from firm demonstrable evidence.

3.?Delivery Confidence – As a result of the compounding factors above, distressed projects typically suffer several core delivery related symptoms. If these are unidentified or left unaddressed, matters accelerate to levels that ultimately threaten the entire project outcomes. It is therefore important where tensions and divisions are rising, often with differing culpability and responsibility views forming, that a reliable, independent, expert-led ‘as-is' performance baseline is developed. This is critically important, as often there is little clarity over physical progress, time/cost incurred, risk, claims and liabilities to go, hampered by the various parties guarding and controlling information to support their own contractual positions and recovery routes. In order to get the needed performance objectivity, it is critical project owners secure early and independent expert assessment of the current cost and time incurred, forecasts, any outstanding procurement (such as critical and/or long-lead items) remaining risks, variations, or likely claims on the project. Added together these build a fuller, integrated base-line picture, together with signposts to likely stakeholder responsibilities, culpabilities and interdependencies.

A vital benefit of such independent assessment and insight is the assembly of quality information (evidence) on which reliable ?intervention, mitigation and turnaround strategies can be developed.

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In next week’s final Part 3 we discuss what measures project owners can adopt, having adequately pinpointed underperformance and distress, to pre-emptively regain control of their projects through focused intervention and the development of an implementable and achievable recovery road-map.